Final Report On Contribution of IPs in Resolution Under IBC 1

Study Group Report on
Contribution by Insolvency Professionals

in Resolution under IBC
Study By
Indian Institute of Insolvency Professionals of ICAI (IIIPI)

NEW DELHI
Study Group Report
Contribution by Insolvency Professionals in
Resolution under IBC.
Published By:
Indian Institute of Insolvency Professionals of ICAI (IIIPI)
ICAI Bhawan, P. O. Box No. 7100, Indraprastha Marg, New Delhi - 110002
Website : www.iiipicai.in
Published in: September 2023
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Copyright © Indian Institute of Insolvency Professionals of ICAI (IIIPI)
Email: iiipi.research@icai.in
Disclaimer:
The views and opinions expressed or implied in this report are those of professional members
and do not necessarily reflect those of IIIPI. IIIPI is not in any way responsible for the result of
any action taken on the basis of views and opinions expressed herein. Material in this report
shall not be reproduced, whether in part or in whole, without the written consent of IIIPI.
FOREWORD
The Indian Institute of Insolvency Professionals of ICAI (IIIPI) is pleased to present
the publication ‘‘Contribution by Insolvency Professionals in Resolution under IBC”
by the Study Group constituted by IIIPI in this regard. This publication was released
on the occasion of the conference on ‘Developing Market for Stressed Assets in
India’ organized by the IIIPI on Sept.22, 2023.
The purpose of this publication is to highlight positive work and contribution of

insolvency professionals in carrying out resolutions under IBC processes and
examine the problems faced by Insolvency Professionals in capacity of IRP/RP/
Liquidator in executing their duties/responsibilities, backed by analysis of relevant
data. The report also highlights the contribution of insolvency professionals outside
the IBC processes, in settling cases and supporting rescue efforts. The report
attempts to analyze the underlying issues, facts, and data in a comprehensive
manner, and also makes certain recommendations to pave the way forward. Such
recommendations are in the context of resolution process, adjudication process,
coordination with COC and stakeholders and liquidation process. The draft report
was widely discussed and deliberated among a group of insolvency professionals
and other experts, before finalization.
I sincerely appreciate and thank CA. Subodh Kumar Agarwal, Past President ICAI
for steering the Study Group and providing his insights, along with members of
the Group who all worked hard to prepare the said report. I also thank Ms Sripriya
Kumar, Director IIIPI, for preparing the initial draft and her contribution.
I also appreciate the efforts put in by CA. Rahul Madan, Managing Director, and
the Research Department of IIIPI for providing their technical and administrative
support in bringing out this publication.
Further, after gaining more experience, this report shall be reviewed from time to
time. I am sure that the professional members of IIIPI and other stakeholders of IBC
will find this publication immensely helpful.
Date: September 22, 2023 Dr. Ashok Haldia,

Place: New Delhi Chairman, IIIPI-Governing Board
Study Group Report on Contribution by Insolvency iii www.iiipicai.in

Professionals in Resolution under IBC
PREFACE
The Study Group constituted by the Indian Institute of Insolvency Professionals of
ICAI (IIIPI) on ‘Contribution by Insolvency Professionals in Resolution under IBC’ is
pleased to present this report.
The Study Group was constituted to highlight the role of Insolvency Professionals
as IRP/RP/Liquidator in the successful outcomes of CIRP/Liquidation processes.
Despite many factors responsible for success or failure of any rescue effort, it
is felt that IPs have been singled out and often find themselves at the receiving
end of the criticism. Over time, judicial pronouncements, and regulatory orders
against the IPs in the capacity of IRP/RP/Liquidators, have also created perception
about professionals’ capabilities and ethical conduct. Therefore, to understand the
Contribution of IPs under IBC, a detailed critical study has been undertaken backed
by facts and figures to highlight the Role of IPs in the ecosystem. The study group
consisted of members having rich experience in managing CIRPs and liquidations
and has attempted to develop a comprehensive document on the subject after
wider consultation intra-group and with other stakeholders through Surveys.
This ‘Contribution by Insolvency Professionals in Resolution under IBC’ has been

created to appreciate that IPs act in unison with many verticals in the ecosystem and
share the success (or otherwise) with such other verticals. The solutions to many
challenges as highlighted in the report lie in cohesive and coordinated approach
among such verticals and pillars of IBC.
The study group is thankful to Dr. Ashok Haldia, Chairman, IIIPI for providing an
opportunity to develop the knowhow as above and providing his insights. The Group
also appreciates the efforts put in by CA. Rahul Madan, Managing Director, and
the Research Department of IIIPI for providing their technical and administrative
support in bringing out this publication. The group is particularly thankful to CA
Sripriya Kumar, for her contribution in creating the initial draft of the report. In
addition, the group expresses gratitude to several other professionals who have
contributed directly and indirectly to the development of this report on ‘Contribution
by Insolvency Professionals in Resolution under IBC’.
Subodh Kumar Agarwal, IP (Chairman of Study Group)

Anuj Jain, IP Ashish Chawchhariya, IP Dhinal Shah, IP
Nitesh More, IP Satish Gupta, IP Sripriya Kumar, IP
Vijaykumar V. Iyer, IP
Date: September 22, 2023

Place: New Delhi
Study Group Report on Contribution by Insolvency v www.iiipicai.in

CONTENTS
1. Background............................................................................................1
2. Stakeholder Awareness and Financial Governance Frameworks.........2
3. Survey of Insolvency Professionals.......................................................4
4. Timeliness of Resolution Process..........................................................5
5. Timeliness of Liquidation Process........................................................13
6. Value Maximization in Resolution Process..........................................16
7. Value Maximization in Liquidation Process..........................................23
8. Conclusion...........................................................................................24
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Contribution by Insolvency Professionals in
Resolution under IBC
1. Background
1.1 The Insolvency and Bankruptcy Code 2016 (“Code”) ushered a new regime
of Insolvency Resolution, in India, with the advent of a creditor in control
regime vis a vis the legacy frameworks which were largely a format of debtors
in possession. This Code also marked the designation of a new profession
of Insolvency Professionals (“IP”) functioning in various roles as Interim
Resolution Professional (“IRP”), Resolution Professional (“RP”), Liquidators/
Administrators and Bankruptcy Trustees of non-corporate persons undergoing
insolvency resolution processes under the Code.
1.2 The Code, to date has met with reasonable success in the primary task of
enabling resolutions and liquidations to release non - productive assets to an
active state whether in resolution or liquidation actions. All the stakeholders
and the Government are committed to actions to enable a higher level of
effectiveness in the functioning of the Code and continuous improvements at
all levels – the Government, IBBI, IPA, IU and the Adjudicating Authorities.
1.3 The profession of Insolvency Professional (“IP”), in India, came into existence
with the introduction of the Code. The report of the Bankruptcy Law Reforms
Committee, the precursor to the Code, (“BLRC Report” – 04 November
2015 ) described IPs as a crucial pillar upon which rests the effective, timely
functioning as well as credibility of the entire edifice of the Insolvency and
Bankruptcy Resolution Process. With the advent of the Code, the IPs became
a new class of professionals accredited by the Statute. They are regulated by
the Insolvency and Bankruptcy Board of India (“IBBI”) as well as the Insolvency
Professional Agencies formed under the Code.
1.4 The Code lays down functions and obligations of the IPs as a Resolution
professional/IRP/Administrator and liquidator in various processes such as
Fresh Start Process, Individual Insolvency Resolution Process, Corporate
Insolvency Resolution Process (“CIRP”), Pre-Packaged insolvency resolution
process (“Pre-pack”), Liquidation and Bankruptcy Processes. During any
of the aforesaid processes under the Code, IPs are expected to exercise
reasonable care and diligence while discharging their duties and comply with
the requirements under the Code and bye-laws as applicable to them.
1.5 IBC introduced insolvency regime in India based on “Creditors in Possession”

which was completely new to India as against “Debtor in Possession” regime
in earlier laws. The initial slack in referral of large accounts, by financial
creditors, to the Code was significantly altered by the Government’s mandate
to refer major accounts into insolvency with RBI’s direction to banks to initiate
Study Group Report on Contribution by Insolvency 1 www.iiipicai.in

Contribution by Insolvency Professionals in Resolution under IBC
insolvency against 12 large loan defaulters on June 16, 2017. The resolution
process of large accounts such as Essar Steel, Jaypee Infrastructure and
the judicial pronouncements in this context have enabled the Code to be
established as a viable and relevant mechanism and provided valuable insights
on effective implementation of the Code.
1.6 The IP profession is a critical part of ecosystem and key driver under the code
tasked with key roles and responsibilities of managing the debtor as a going
concern, enabling the resolution / liquidation process and value maximisation
in a time bound manner for the various stakeholders in the process.
1.7 The success of any Insolvency Resolution process or Liquidation process is

gauged primarily in terms of the expeditious closure and the value recoveries
in such process. Needless to state that the value recoveries in any resolution
or liquidation process, to a great extent, depend on the intrinsic value of the
Corporate Debtor, the market demand for such assets and timely functioning
of all the constituent stakeholders of the Code.
1.8 While value recoveries and timely closures are indeed significant indicators, it
may also be necessary to appreciate the impact of Code on the entire Indian
ecosystem including its ability to strengthen the present and future financial
governance frameworks in the Country. The role of the IPs, regarded as the
key drivers of the processes, in these aspects needs to be underscored.
1.9 This study paper seeks to present some critical perspectives on the
contributions and role of an IP in reference to the below mentioned themes:
a. Stakeholder awareness and improvements in Financial Governance
frameworks;
b. Timeliness of Resolution Process;
c. Timeliness of Liquidation Process;
d. Value Maximisation in Resolution;
e. Value Maximisation in Liquidation;
2. Stakeholder Awareness and Financial Governance Frameworks

2.1 There are presently over 4296 registered Insolvency Professionals in the
Country. Given the young law and the unique format of a ‘process in rem’
that it envisages, such IPs have also played a seminal part in disseminating
knowledge and awareness on the Code.
2.2 Many IPs i.e. IRPs, RPs, and Liquidators have acknowledged that stakeholders,
especially Government authorities such as Income tax, Indirect taxes and
EPFO often seek their guidance on the mode and manner of preferring claims.
With sustained efforts of the IPs, from a legacy state of non-submission or
minimal submission of claims due to lack of awareness, there has been a
consistent improvement in the claim’s submission process including filing
before the IRP, RP or Liquidator on a timely basis.

Stakeholder Awareness and Financial Governance Frameworks
2.3 A large presence of IPs has also enabled a robust base of Trainers and
Resource persons on the Code and efforts in the conduct of programs by IBBI,
IPAs and at individual levels by IPs and IPEs and other organisations have
contributed to the significant awareness of the Code. The IIIPI of ICAI, has till
date enabled about 56,000 manhours of participation in such programs which
are largely anchored by IPs. Such programs span the entire spectrum of topics
including basics of the Code, Role of IPs in the conduct of CIRP or Liquidation
processes, guidance to members of the Committee of Creditors, legal issues
and evolving jurisprudence, etc.
2.4 The legal frameworks such as CDR, SDR, S4A, DRT Act, SARFEASI Act,
RDBFFI Act etc operated in a ‘proceeding in personam’ format and did
not adequately provide and take cognizance of recoveries from Avoidance
Transactions. IPs have been instrumental in determining and filing over
Rs 2,00,000 Crores worth of applications on matters relating to Avoidance
Transactions. Timely recoveries of such amounts, even partially, will enable
further capital formation in the economy, deter corporate misconduct and
generate multiplier effect caused therefrom.
2.5 Under the legacy laws, whilst processes existed for performance of forensic
audits by lenders, outcomes of such audits were not time-bound and were
often fraught with data challenges and delays resulting in little or no recoveries.
An identification of fraud triggers criminal complaints and the consequent legal
processes which are time consuming. Many lenders have stated that the Code
processes, enabled by IPs are quicker and provide better insights to such
kinds of transactions and a structured road map for possibility of recovery.
2.6 With over 800 Avoidance Applications filed, it is obvious now that at least all
major banks / lenders and large financial institutions have been sensitised
in aspects of preferential transactions, diversion of funds, undervalued
transactions, financial mis-reporting and transactions of fraudulent nature.
This, it is reckoned, will not only enable recoveries, but will also be seminal
in appreciating the context for the future and to enable deterrence of such
conduct even in non-IBC scenarios.
2.7 It is widely believed that the learnings from the conduct of Code processes
have also resulted in significant changes to the Financial Reporting framework
under schedule III of the Companies Act 2013 and auditors’ reporting
including enhanced disclosures. These changes are in respect of additional
information on aging of projects, wilful default status, liquidity assessments
through key ratios, transactions with strike-off companies, funds transferred
to intermediaries for ultimate beneficiary being related parties/ connected
persons, etc. The requirements are now mandated to be reported in clear and
unequivocal terms with non-compliances having been brought under the ambit
of audit reporting as well. As such these developments would lead to a higher
level of management accountability.
2.8 IPs are also required to engage with statutory and internal auditors of corporates
and such interactions have also been found to have enabled a higher level of

appreciation of risks by the audit fraternity. ICAI has in fact set up a separate
Committee for Insolvency and Bankruptcy Code to enable higher awareness
about the law and practice even by ICAI’s members who are not Insolvency
Professionals.
2.9 IPs by their conduct of processes have also enabled a higher level of
awareness among promoters/ management about the Code, the need to
approach insolvency Courts at incipient stage and also to deter them from
indulging into avoidance transactions / fraudulent conduct.
2.10 Institutions such as the ICAI are also actively engaged in stakeholder education
and awareness beyond the ambit of entities that are presently covered under
the Code. A case in point is a Memorandum of Understanding signed by the
Accounting Research Foundation of ICAI with the Handlooms Department
of Government of Tamil Nadu to advise the State Government on imbibing
best practices in liquidation of cooperative societies of the State. The relevant
Cooperative Societies Act does not provide for a time bound framework,
adoption of Registered Valuation procedures or specify detailed guidelines
in relation to filing and admission of claims and other processes, etc., in the
conduct of Liquidation. The drafting of a Standard Operating Procedure is
in progress to enable timely closure of such processes as well as for value
maximisation for the State. This project has primarily been enabled by project
champions who are Insolvency Professionals.
2.11 The capital market regulator, SEBI has also envisioned the services of
Insolvency Professionals to act as Administrator under the SEBI (Appointment
of Administrator and Procedure for Refunding to the Investors) Regulations,
2018. More such avenues may be created in future for IPs to act as administrators
under various other statutes and regulatory provisions thereunder.
3. Survey of Insolvency Professionals

A survey among IPs was conducted at the behest of the Study Group to
seek their feedback on various areas relevant to this document. This survey
received responses from 55 IPs. The key highlights of the survey are tabulated
below:
Particulars Responses
No. of cases handled by the responding IPs 349 cases
Range of the Claims size involved in 37%of IPs handled in aggregate claims
aforesaid cases. worth Rs.1000 cr & above.
32% of IPs handled in aggregate claims

worth Rs.100 cr – 1000cr. And 31%
handled in aggregate claims worth less
than Rs.100 cr.

Survey of Insolvency Professionals
Particulars Responses
Delay in admissions of cases under Code 73% of respondents say there is
significant delay in admission of cases.
Lack of support / co-operation from existing 60% IPs answered “significant lack of
management of CD Co-operation”
Delays involved in Court Process 80% of Respondents acknowledge
the considerable delays in the Court
process.
Avoidance Transactions and adjudication 87% IPs agreed that there is a delay in
processes adjudication process under Avoidance
Transactions.
Availability of Interim Finance In 92% of the cases interim finance was
not available.
Role of the Committee of Creditors In 50% of cases CoC provides
supportive role
Inter creditor disputes Almost 50% IPs denied existence of
Inter creditor disputes and 30% reported
for low level of disputes.
Evolving Jurisprudence Almost 50% of IPs agree that cases are
impacted (either positively or negatively)
with evolving Jurisprudence.
Frequency of Frivolous litigation by the Only 38% IPs agreed that there are
Stakeholders frivolous litigation cases filed by the
stakeholders.
Frequency of Liquidation/s completed 92% IPs submitted that cases are not
within 365 days. completed within 365 days.
Is there a need for incorporating specific 44% IPs agreed for the same.
provisions in IBC/Regulations on a code of
conduct for members of the COC?
Average time taken in getting the Resolution 138 days on an average, from filing
Plan approved by AA the application for resolution plan till its
approval from AA.
4. Timeliness of Resolution Process

4.1 The Average time for completion of CIRPs
The Average time for completion of CIRPs (Analysis of completed CIRP cases
till March 31, 2023, by IBBI) as placed below indicates that a CIRP period of
180/ 270/330 days which is prescribed by the Code is more an exception than
a norm. The average timelines for CIRP processes ending in Resolution is 831
days and that for CIRP processes ending in liquidation, is 623 days.

Sl. Average As on March, 2021 As on March, 2022 April 2022 to March, 2023
time for
completion of No. of Time (In days) No. of Time (In days) No. of Time (In days)
CIRPs Processes Processes Processes
covered Including Excluding covered Including Excluding covered Including Excluding
excluded excluded excluded excluded excluded excluded
time time time time time time
1 From ICD to 351 464 406 498 535 451 180 831 682
approval of
resolution
plans by AA
2 From ICD 1287 352 NA 1630 415 NA 400 623 NA

to order for
Liquidation
by AA
4.1.1 The key aspect is whether the Insolvency Professionals could have
done better to improve and maintain these timelines. The law provides
for strict timelines in terms of mandating due dates for critical actions
under the Code. The performance of such actions on key dates would
have enabled closures within prescribed timelines which is not the
case. Hence, it is necessary to deliberate as to why processes could
not be completed within the relevant timelines.
4.2 Delays in admission of cases to CIRP
4.2.1 There are considerable delays in admission of cases to CIRP and are
found to have extended to even as long as 2 years from the date of
application. The Code prescribes a linear mechanism to be followed
for admission which essentially requires the determination of default
on dues by Corporate Debtor for financial and operational creditor’s
application and additionally, the absence of a pre-existing dispute
for operational creditor’s application. Recording of the debt with the
Information Utility (IU), by the petitioning financial creditor has also
been made mandatory.
4.2.2
The adjudicating authorities are indeed trying their best to expedite
admission processes. This is, however, fraught with protracted litigations
and offers of settlements by respondents. Applications are also seen as
mechanisms by creditors, to force recoveries, rather than resolution.
4.2.3 Instances of malicious commencement of proceedings have also been

observed. Although the Code provides for penalties under Sec 65 as
a deterrent in such cases, such instances continue to occur, though
in small number, impairing the efficiency and effectiveness of the
ecosystem.
4.2.4 It is widely felt that these delays in admission bring uncertainties in
working of Corporate Debtor and are also found to erode value
especially in the proverbial twilight period of a pending proceeding with
the debtor still being in control of the asset.

Timeliness of Resolution Process
4.2.5 The Code must also provide for a ‘straight through process’ of admission
and timelines should be adhered to. The admission should be at the
touchstone of Default (for all creditors) and dispute (for operational
creditors) as prescribed under the Code with the basis of default being
established from the Information Utility’s records.
4.2.6 A well-defined mechanism needs to be instituted to discourage the

initiation of frivolous or vexatious proceedings including invoking of
penalties under Section 65 of the Code by AA.
4.3 Lack of support / co-operation from existing management of CD:
4.3.1 It has been observed that many employees and directors resign prior
to or after initiation/commencement of insolvency proceedings due to
many reasons such as non-payment of salary by the Corporate Debtor,
lack of clarity on the probable outcome and time for completion of the
resolution process, potential risks involved or other personal reasons.
In such a scenario, exits often tend to be hurried and unplanned without
proper handover – takeover processes in relation to data, books of
accounts and records of the CD. Although the Companies Act 2013
requires the Directors to be responsible for the maintenance of books
and records and information, such attritions and exists are often used
as an excuse and cited by suspended Board of Directors for their
inability to provide information relevant to the CIRP process.
4.3.2 In other cases, despite a legal mandate under Sec 19 of the Code
to support and provide information, the suspended Directors do not
provide information and records necessary for the conduct of the CIRP
process. This results in delay in preparing Information Memorandum,
completing the valuation exercise and the transaction audit and also
impairs RP’s ability to proceed with and manage the bid process
smoothly and in a time-bound manner.
4.3.3 The Code provides for support, cooperation of CD’s ex- management
for custody and control of records/assets by the Insolvency
Professional. There is no requirement for a Statement of Affairs to be
provided by the erstwhile management. In this context, it is to note
that the erstwhile Companies Act 1956 and the Companies Act 2013
provided for furnishing a statement of affairs in a prescribed format
and to be submitted to the Official Liquidator. Such a statement was
required to be furnished to the OL within 21 days of the appointment of
the provisional liquidator under the Companies Act 1956 (extendable
to 3 months) and within 30 days (extendable to 60 days) under the
Companies Act 2013. Both the Companies Acts provide penalties for
non-compliance and such kinds of penalties are also enshrined in the
Code in Section 70 although not specifically referring to Sec 19 of the
Code.

4.3.4 A stringent mechanism should be provided in the Code to make the

past KMPs, promoters and directors liable, in case the requisite data is
not made available to the IRP, RP, Liquidator and such matters should
be enforced in a time-bound manner.
4.3.5 The Code may also, on the lines of the Companies Act 2013, provide
for a structured format of a Statement of Affairs to be furnished by
the Directors of the CD within 15 days of commencement of the
CIRP process including penal provisions for non-furnishing of such
information.
4.4 Delays in forming an Opinion, determining amounts, and filing Applications in

respect of Avoidance Transactions.
4.4.1 It has been observed that despite the initial opinion being made by the
RP in a timely manner, there have been delays in filing of applications
in respect of Avoidance Transactions. The appointment and report
of a transaction auditor is often considered necessary both from
confirmation of occurrence of such transactions and also to bolster the
legal case filed as such opinion is independent. In a few cases, it was
also observed that the AA had directed the RP to re-file applications
along with a transaction audit/forensic audit report although there is no
provision in the Code to require such experts to be engaged.
4.4.2 The challenges faced by the RP and transaction auditors include CoC
approvals for such appointment especially for cost and fee payable to
such independent experts, delay in receiving data, incomplete data, lack
of co-operation from the directors/employees of the Corporate Debtor,
etc. The RPs also face extreme challenges, such as non-availability
of any employees in the Corporate Debtor or accounting records not
handed over to the RP due to non-cooperation by the suspended board
of directors and/or promoters.
4.4.3 Further, in case the data and other records are not available with the
Corporate Debtor, the RP also attempts to approach the statutory
auditor, creditors, accounting and/or tax consultants of the Corporate
Debtor requesting them to share the information available with them.
Such parties also need time to extract the records of the Corporate
Debtor and often are not willing to cooperate.
4.4.4 In view of the above challenges, the remedy that an RP ideally explores
includes approaching the AA and seeking necessary directions against
non-cooperation by the employees, suspended board of directors and/
or promoters, auditors, previously associated KMPs, Directors, etc.
However, proceedings relating to such petitions also take significant
time for orders and for compliance thereof.

4.4.5
Hence there are delays in making opinions, determining amounts,
and filing applications in respect of Avoidance Transactions. Potential
recoveries from Avoidance transactions, especially, when confirmed
by the AA and are material, would influence the decision of the CoC in
this regard as the proceeds may go to various stakeholders.
4.4.6 Where applications have been filed under Sec 66 (Fraudulent

Transactions) of the Code, the promoters, if held guilty before the
approval of resolution plan, cannot participate in the Resolution Plan
process (Sec 29A). This creates further uncertainty in the CIRP
process, consequent loss of time, and potential litigation which cause
an RP to be tentative in her actions.
4.5 Legal Process Challenges
4.5.1 The delays in completion of CIRP are also a function of delays in

adjudication of various applications preferred to Adjudicating Authorities
(“AA”).
4.5.2
In certain cases, it is observed that even where fully compliant
Resolution Plans have been unanimously approved by the CoC, the
adjudication process has taken more than 1/2 years for Resolution Plan
approval which delays the release of productive assets back to the
ecosystem. While the Code prescribes a standard timeline of 14 days
for admission of financial creditor applications, no standard timelines
have been prescribed for disposal of Resolution Plan applications
which are mission-critical for the closure of the process. Until the plan
is approved by the AA, the SRA cannot take over management of the
CD, hence the need for quicker approval of resolution.
4.5.3 An analysis of 519 cases where structured data was available, indicated
that the average time for approval of resolution plans by NCLT since
the date of filing plan for approval, was about 196 days. Out of these,
in about 190 cases, it took more than 180 days for NCLT to complete
the approval process. This is quite significant being more than half of
the total period (330 days) mandated for closure of the CIRP process
under the Code.
4.5.4 It is also imperative to note that many avoidance applications which
have been filed till date have not been decided by the AA. As per latest
quarterly newsletter published by IBBI, out of the 871 applications
filed, only 163 applications have been disposed of till 31st March 2023.
The total amount involved in such avoidance applications is about Rs
285,000 Crores and expeditious closure of such applications will bring
back value for creditors. Again here, despite the mission-critical nature
of such applications, there are no fast-track mechanisms or timelines
prescribed for such applications.

Sl. Nature Applications Filed Applications Disposed

of trans-
No. of Amount No. of Amount Amount
actions
transactions involved (Rs. transactions involved clawed
In Crore) (Rs. In back
Crore) (Rs. In
Crore)
1 Preferential 134 15,056.69 40 651.13 34.15

2 Undervalued 16 884.73 4 362 5.77
3 Fraudulent 176 64,234.89 23 1,049.23 5.59
4 Extortionate 3 70.68 - - -
5 Combination 542 2,05,121.40 96 40,034.15 5,169.59
Total 871 2,85,368.39 163 42,096.51 5,215.10
4.5.5 Whilst the Government has been proactive and has set up additional
benches of Adjudicating Tribunals, certain matters referred below merit
attention in the context of delays in adjudication;
• Frivolous and vexatious applications discussed in the earlier

segment.
• Multiplicity of litigations by stakeholders at various stages of CIRP

and even prior to admission, including inter-creditor disputes.
• Full member strength in AAs not yet achieved by the Government.
• Absence of dedicated AAs for IBC matters. The AAs including

Appellate Tribunals are handling non-IBC matters as well relating
to Companies Act and Competition Act.
• No fast-track process for immediate disposal of Resolution Plan

and connected applications which are currently subjected to routine
process and timelines of the AA’s system.
• There are no straight through processes under the Code. For

instance, extension of CIRP for 90 days is provided in the law
subject to consent of majority CoC approval. Even in such cases,
applications are required to be filed for NCLT proceedings and
approvals, resulting in larger volume of applications before the AA,
further burdening the judiciary.
4.5.6 It is suggested that benches be fully resourced to peak strength and
certain benches be nominated to handle matters exclusive to IBC
processes and numbers of such benches be enhanced to provide for
closures of all litigations within 30 days (reasonable time) of filing of
petitions.

4.5.7 Certain applications such as those seeking extension under Sec 12

of the Code, can be considered for digital filing and ‘Straight Through’
approval provided all requisite documents are placed on record along
with the application. A simple digital confirmation process of the
members of the CoC can also be enabled to obtain additional evidence, if
required, of such consent to extension. Where there is unanimous CoC
consent for such extension, an immediate straight through process can
be considered, subject to certain checks and balance such as review
by AA.
4.5.8
Code may consider prescribing timelines (directory in nature) for
completion of adjudication of Resolution plan applications filed for
approval under Sec 30 and Avoidance applications under Sec 43, 45,
49, 50 or 66 of the Code.
4.6 Role of COC
4.6.1
Expeditious decision making of the CoC is also critical for timely
completion of the CIRP process. The Code mandates that the RP
has to obtain CoC approval for actions including under Sec 28 of the
Code as well as for other items such as approval of resolution plans,
extension of time, etc.
4.6.2 With respect to issues to be deliberated and voted upon at the CoC
meetings, many RPs have stated that CoC attendee members are
often found to not have the requisite authority to vote and do not take
decisions during the CoC meetings. For agenda items, generally they
take time of 10 -25 days.
4.6.3 It is also observed that many CoC members request for extended
e-voting timelines to enable them to seek internal approvals and vote
on the agenda items. This results in a delay in completing the CIRP as
extended e-voting timelines in CoC meeting delay the required action
to be taken.
4.6.4 The problems on account of the above causes of delay are further
accentuated in the case of the large number of members in the CoC.
4.6.5 While the roles and responsibilities and even a Code of Conduct for
an IP is well enshrined in the Code, the roles, and responsibilities for
lenders to render timely support to the insolvency resolution process is
not adequately defined in the Code.
4.6.6 In order to address these issues, it is imperative that a Code of Conduct
or some other mechanisms for members of the CoC be considered
at the earliest, through amendments in Code and/or regulations
thereunder. This will result in faster completion of the CIRP including
providing maximum voting time for members of the CoC.

4.7 Interim Finance
4.7.1 In most cases, cash flows of the Corporate Debtor may be inadequate
to fund the CIRP costs and the IRP/ RPs often approach the CoC
seeking approval for interim finance. The CoC members have been
reluctant in funding the CIRP costs due to which the fees of the RP,
legal advisors, and other professionals, in many cases, remain unpaid
till the completion of the resolution or even the liquidation process.
4.7.2
Whilst the liquidation regulations provide for funding of liquidation
expenses by stakeholders who are financial institutions, there is no
mandate to the CoC members (who are the ultimate beneficiaries)
to fund expenses in CIRP even though there have been judicial
precedents directing COC to fund it.
4.7.3 A revision in the Code/ Regulations to require members of the CoC,

being financial institutions or even all members of the CoC, to contribute
to CIRP cost, would strengthen the efforts of the RP in smooth-running
of the CIRP process.
4.8 Inter-Creditor Issues
4.8.1 IRPs/RPs often face challenges especially in managing large CoCs

with more than 10 financial institutions and banks. These creditors
are often driven by their internal compulsions which results in inter-
creditor disputes resulting in filing of applications before Adjudicating
Authorities. Such inter creditor disputes typically relate to preferential
payments, distribution, security interest, dispute in claim admission,
etc. Again, there is an issue of delay in disposal of such applications
which impairs efficiency of the CIRP process.
4.8.2 A solution which provides for timely resolution of inter-creditor issues is

imperative to ensure that the timelines as prescribed under the Code
are adhered to and this should not delay the disposal of the resolution
plan approval or rejection application. As a solution, all contentious
issues should be settled democratically through time bound COC’s
voting process as provided in the Code.
4.9 Evolving Jurisprudence
4.9.1 It has been observed that there have been instances of conflicting
judgements by different benches of NCLT/NCLAT dealing in similar
matters, which adds to the complexity and consumes precious Court/
Tribunal’s and RP’s time. At times, these matters tend to get settled
only at the Supreme Court. However, the evolving jurisprudence
around the provisions of IBC has enabled better and faster resolution
of future CIRP cases.

Timeliness of Liquidation Process
4.9.2 Further, in case of emerging judicial precedents, judgements of Apex

Court or NCLAT are generally applicable in the pending matters before
Adjudicating Authorities. In some of the recent cases, NCLTs have also
remanded back the resolution plans submitted by the RP to AA for
its approval on the grounds that the same are not compliant with the
latest amendments and judicial pronouncements, effectively proposing
a retrospective amendment in a resolution plan approved by the CoC,
even though the facts and circumstances may differ from case to case.
For example, after the supreme court judgement in case of Rainbow
Papers, some AAs have remanded back the resolution plans submitted
prior to the judgement for reconsideration. In view of the same, there is
a considerable delay in completing the CIRP as the resolution plan is
now required to be reconsidered by the CoC.
5. Timeliness of Liquidation Process

5.1 As per the Quarterly Report published by IBBI up to March’23, 45% of all
CIRPs have ended by an order for commencement of liquidation of the CD.
Most CIRPs took over 270 days to get concluded by various ways including the
order for liquidation. Of the 45% cases which landed in liquidation after CIRP,
76% were already in BIFR or non-functional or both. The above numbers
clearly indicate the time lapse in the initiation of liquidation for these CDs, most
of which were already non-operational before commencement of CIRP.
Sl. Average As on March, 2021 As on March, 2022 April, 2022 to March, 2023
No. time
No. of Time (In days) No. of Time (In days) No. of Time (In days)
Processes Processes Processes
covered covered covered
Including Excluding Including Excluding Including Excluding
CIRPs
From
ICD to
approval of
Resolution
1 351 464 406 498 535 451 180 831 682
Plans by
AA
From ICD
to order for
Liquidation
by AA
2 1287 352 NA 1630 415 NA 400 623 NA

Sl. Average As on March, 2021 As on March, 2022 April, 2022 to March, 2023
No. time
No. of Time (In days) No. of Time (In days) No. of Time (In days)
Processes Processes Processes
covered covered covered
Including Excluding Including Excluding Including Excluding
Liquidations
From
LCD to
submission
of final
3 267 427 NA 403 489 NA 117 678 NA
report
under
Liquidation
From
LCD to
submission
of final
4 report 447 381 NA 708 427 NA 316 376 NA
under
Voluntary
Liquidation
From LCD
to order for
dissolution
5 under 146 398 NA 237 516 NA 73 829 NA
Liquidation
From LCD
to order for
dissolution
under
6 245 512 NA 351 583 NA 161 789 NA
Voluntary
Liquidation
Most cases which are ordered for liquidation are due to lack of receipt of
Resolution Plan to the satisfaction of the CoC, which could be due to erosion
of business value or non-availability of any assets in the Corporate Debtor and
thereby resulting in CoC’s voting for liquidation.
5.2 Delays in Liquidation Process
Of the ongoing liquidations as on March 2023, more than 55% of cases have
been ongoing for more than 2 years, and 26% have been ongoing between
1- 2 years. Therefore only 19% of cases are being closed in the prescribed
timeline of 1 year. The key reasons for such delays are generally:
5.2.1
Co-ordination issues with Stakeholders Consultation Committee
(SCC).
a) The SCC comprises of representatives of secured FCs, unsecured

FCs, workmen and employees, government authorities, operational

Timeliness of Liquidation Process
creditors, and shareholders. The liquidator is required to facilitate

the nomination of these representatives from each sub-group and
then convene meetings for taking their advice on various matters
as prescribed under the law.
b) The above involves significant co-ordination efforts to be made by

the liquidator and further, these stakeholders come from varied
backgrounds and have different interests and risk appetites
which practically makes conclusion of any decision very difficult.
This includes the decision for reduction in prices of assets in
subsequent auction and pursuing the avoidance application after
dissolution. Particularly those stakeholders who find that they
will not get any amount as per waterfall mechanism under Sec
53, either do not vote or give negative vote for resolution upon
reduction of prices. It may be mentioned that as per provisions in
the Code, the Liquidator needs to inform the AA and IBBI wherever
s/he disagrees with advice from SCC in respect of any decision.
c) On the lines of CIRP process, there may be provided the roles and
responsibilities of Authorized Representative (AR) for representing
various stakeholders or creditors in class. This would ensure better
coordination in a professional manner.
5.2.2 Delays related to Avoidance Transactions.
a) Of the total applications filed till March 23, only 18% of the
applications have been disposed of. Most of these applications
continue even after the CIRP is ended or even after the
dissolution of the CD and the liquidator/RP is required to continue
representing these matters until disposed of. In several cases, as
it is difficult to continue these applications after the end of process
due to various factors including a lack of litigation funding.
b) Before amendment vide Reg.44A (effective Sept.’2022) allowing

avoidance applications to be proceeded with even after liquidation
process is over, the stakeholders often pushed for conclusion of
these proceedings before the final order for dissolution thereby
adding to the delay in the process. Many such cases of liquidation
closures remained pending only due to adjudication of avoidance
applications. However, with recent amendment in Regulations, it
is expected that the earlier timelines shall get reduced.
c) Post dissolution, drawing reference from international territories

like UK, avoidance transactions may be taken up by special
public/special office created through the statute, rather than the
liquidator. The outcome of such actions may be distributed as per
Sec 53 and enabling Liquidation Regulation 44A in this regard. This
would release the liquidator for more productive engagements.

5.2.3 Challenges on account of E- Auction
a) Most CIRPs are triggered upon lapse of significant after initial

default, resulting deterioration of asset’s value., There may not
be a ready market for such assets. Hence the fixation of a higher
reserve price and subsequent revision, at times, requires multiple
rounds of auction before the sale can be concluded.
b) Further, the decision regarding the mode of sale also requires

deliberation, which extends the overall timelines. In particular,
matters like Compromise and Arrangement and ‘sale as a going
concern’ are subject to fixed timelines. In order to get these
timelines extended, the liquidator needs to approach AA for
approval, which again may take a long time.
c) To take care of genuine cases and in the interest of timeliness

and value maximization, subsequent rounds of auctions may be
allowed with higher/flexible reduction, rather than prescribing ‘not
more than 10% reduction in the reserve price. This may, however,
be subject to consultations with Stakeholders’ Consultation
Committee (SCC).
6. Value Maximization in Resolution Process

6.1 As per data published by IBBI on Corporate Insolvency Resolution Processes
(CIRP) yielding resolution plans as on March 31, 2023, a total of 678 CIRP
cases have resulted in successful resolution.
6.1.1 A preliminary analysis of the data shows that Financial Creditors have
realized 34% of their total admitted claim value (INR 2,76,923 Crore
realized against INR 8,11,054 Crore claimed). Amounts so realized are
163% of the Liquidation Values which stood at INR 1,69,552 Crores. The
Liquidation Values seem to indicate that the assets were impaired even
when the CD was admitted to CIRP and realizations under Resolution
Plans are somewhat indicative of the state of the assets held by the
CD. Comparatively, Operational Creditors have realized only 11% of
their total admitted claim value (INR 9,866 Crore realized against INR
90,631 Crore claimed). Operational creditors have little or no say in the
distribution of plan amounts as they are generally unsecured and under
waterfall, they come almost last in the queue of distribution.
6.1.2
A break-down of the available information alongwith summarised
analysis as on 31st March 2023 is as below:

Value maximization in Resolution Process
Admitted Claims of FCs

Cases with No. of % % of INR % Realizable Liquidation OC Realization
realization cases Total Companies Crore Amount value (INR Claim for OC
for FCs in the cases that were by FCs Crore) (INR (INR Crore)
range of: Defunct (INR Crore)
Crore)
>100% 12 2% 25% 1,645 0% 1,844 1,081 379 496
=100% 51 8% 23% 9974 1% 9974 5084 15223 1000
>=80% <
34 5% 20% 77344 10% 65987 35461 6030 1,296
100%
>=50% <80% 93 14% 38% 91,307 11% 57168 25737 6070 2551
>=30% <50% 128 19% 31% 232728 29% 93405 59595 23888 1567
>=20% <30% 95 14% 44% 82858 10% 19480 14121 8608 1,074
>=10% <20% 108 16% 40% 168228 21% 23840 22337 29498 1658
<10% 157 22% 44% 146970 18% 5225 6136 14636 224
Total 678 100% 811054 100% 276923 169552 90631 9866
6.1.3 15% of the cases (in number) and 11% of the total admitted FC claims
have fetched realisations of over 80%. While the overall realisation %
remains low, each case needs to be looked at individually to understand
the nuances and reasons behind the realisation value vis a vis claim
amount.
6.1.4 The Top 50 cases (in terms of amount of Admitted claims of FCs),
being ~7% of the total number of cases, account for ~75% of the total
admitted claims of FCs. In such cases, against a total admitted financial
debt of ~INR 6.14 Lakh Crore, the realization is INR ~2.25 Lakh Crore
(~81% of the total realisation by FCs).
6.1.5 Further, in 128 cases (29% of the FC claims in value) Financial Creditors
have fetched realisation against their claims in the range of 30-50% of
their claim amount. Out of these 128 cases 10 cases account for 90%
of the total FC’s claim in this category. These 10 cases include certain
cases which were a part of the initial list of “Dirty Dozen” for which IBC
referrals were mandated by the RBI.
6.2 Based on practical experiences of the IPs involved, lower realisations in

Resolution Plans occur due to a wide range of reasons as discussed below:
6.2.1 Delay in initiation of CIRP / time-lag between identification of stress or

default and CIRP commencement
(a) In several cases, especially the initial lot of cases admitted under
CIRP, there has been a significant time lag where companies
have been under stress for significant duration before finally being
admitted in CIRP and trend seems to continue.

(b) Further, in cases while lenders have initiated proceedings under

IBC, the judicial process consumes significant time resulting in
delayed commencement of CIRP proceedings. All this while, the
valuation of corporate debtor continues to erode as against the
debt that has already accrued and has been defaulted upon.
6.2.2 Legacy Issues and Defunct Corporate Debtors
(a) As mentioned above, several of the cases admitted under CIRP
in the initial days of IBC were those which have been under
stress / tagged as defaults since past several years. Lenders and
Corporate Debtors having attempted restructuring under various
guidelines issued by RBI and other recovery mechanisms such as
BIFR, SARFAESI, etc. prior to implementation of the IBC.
(b)
These would also include corporate debtors embroiled in
regulatory and legal challenges involving action by regulatory and
enforcement agencies, causing operational challenges for such
corporate debtors. Further, as per data published by IBBI, of the
total 678 CIRP cases which yielded resolution plans, 251 cases
(~37%) were such where the Corporate Debtors were defunct.
6.2.3 Incomplete Projects
(a) Where the Corporate Debtor has a majority of their assets under
construction / development, the successful resolution applicant
may have to incur additional expenses to complete the project or
develop those assets, post successful resolution. Such additional
costs required to complete the project, result in lower valuation of
the Corporate Debtor resulting in more haircut to lenders.
(b) Typically, in addition to the Plan amount, the following additional

aspects such as cost of completion, marketing costs and finance
costs, need to be kept in mind while arriving at the Liquidation
Value vis a vis the Resolution Plan amount. There may be
difference in assumptions of the registered valuer vis-a-vis the
successful resolution applicant in terms of cost to complete, costs
of regulatory approvals, marketing costs, interest rates considered
for discounting as well as the timeline assumptions for completion
and bringing the assets to the state of commercial use.
6.2.4 Inter-dependencies with Related Parties of Corporate Debtor
(a) In cases where group of assets belonging to a single business is

divided across various entities of the promoter group, the assets
of such Corporate Debtor may not fetch desired value. This is
because the successful resolution applicant may not find the
potential to extract value out of such assets due to dependencies

on other group companies, unless group insolvency approach is

adopted for such cases. For example, a building is constructed
by CD on the land of group company with both land and building
being mortgaged to lenders, either same set of lenders or different
lenders. There have been cases whereby such assets were
allowed to be sold simultaneously under SARFAESI and IBC.
6.2.5 Investment Companies
(a) There could be cases where a Corporate Debtor pre-dominantly

holds investments in shares of various other group companies /
SPVs. In a group structure, the loans may have been availed by the
holding company/Corporate Debtor whereas the actual business/
cash flows may accrue to the concerned SPVs/subsidiaries/
Associates/JVs, which are separate legal entities.
(b) In an Insolvency scenario, this may again result in higher haircuts
as the cash generating entity would have its own set of liabilities
and may not be able to support the parent. If there are no other
major tangible assets available with the Corporate Debtor, the
lenders are likely to get only marginal realisations against the
claim values.
6.2.6 Duplicity of Claims
(a) A review of the cases admitted to the Code process also indicates
duplicity of claims. In certain cases, claims are preferred both on
the principal debtor as well as the Corporate Guarantor where both
entities are admitted to CIRP. This causes the same debt to be
admitted as a claim albeit in two or more entities, leading to double-
counting of the debt and consequent misreading of the data.
(b) The impact of such duplicity needs to be examined to arrive at an

accurate picture of Realisations under Resolution Plans vis-a-vis
admitted claims or the Liquidation Value.
6.2.7 Delays in Adjudication of Avoidance Application
(a) Many avoidance applications which are filed by RPs in situations

involving loss of assets/siphoning of the funds of Corporate Debtor
are pending adjudication. This avenue offers a significant potential
for improving the overall realisation through the IBC processes.
6.2.8 Timelines in the CIRP Process
(a) The various factors cited in the segment(para 4) on Timeliness

of the CIRP processes also impair realisations. These include
non-availability of data from the promoters, litigations, judicial
delays etc.

6.2.9 Capability Building of RPs
(a)
The present landscape primarily comprises of individual IPs
managing cases. IBBI has recently allowed IP Entities to practice
the profession in the name of the Entity. However, clarity on how
a disciplinary mechanism against an individual IP being part of the
IPE would impact the status of the IPE, is not yet available and
therefore not many IPs are keen to collaborate to form IPEs for
such purpose.
(b)
While the Code and the regulations govern the conduct and
actions of an IP, it is widely felt that publication of Professional
Standards by IBBI (similar to Standards on Auditing of ICAI or
Secretarial Standards by ICSI) would enable more confident and
uniform conduct of processes under the Code. These Standards
may ideally by drafted under the broad themes of Basic Principles,
Planning, Execution, Documentation and Reporting. The
professional standards as such can be seen as consolidation of
best practices across these areas, drawing reference from system
of Statement of Insolvency Practices (or SIPs) being followed in
UK. Such SIPs, about 17 in number, are formulated by a joint
committee of UK’s insolvency professional bodies (equivalent to
IPAs in India).
6.2.10 Personal Guarantors
(a) In almost all cases of Resolution Plans, the financial creditors
reserve their right to proceed to recover the dues based on
personal guarantees offered for financial facilities. The code does
not provide for a linear mechanism in this regard and there are
separate processes and IPs appointed for such PG applications
filed before the AA.
(b) A mechanism should be provided under the Code to include such

assets of the guarantor in the general pool of assets available
for the CIRP for efficient resolution of the CD. In such cases, the
lender who has been secured by way of such assets, may be
required to participate in the process by joining as member in
common COC.
(c) Section 96 in respect of interim moratorium, may be amended

to be made inapplicable to PGs. Further, Section 97 may be
amended to provide for better coordination between the IIRP
of a PG and the CIRP of a CD to whom the PG has extended
a personal guarantee. In such cases undergoing Insolvency
Resolution concurrently, a common RP may be appointed.

6.2.11 Incidence of Grievances by the Stakeholders against IPs
(a)
Many IRPs/ RPs/ Liquidators are concerned with the growing
incidence of grievances by stakeholders against Insolvency
Professionals (IPs) which are often found to vary depending on a
variety of factors such as the complexity of the insolvency process,
the size of the corporate debtor, and the number of stakeholders
involved.
(b)
Grievance mechanism with IBBI and IPAs exists with fees
for filing grievance application at as lows as INR 1500 which
leads to multiplicity of filing grievances at the slightest issue. At
various discussion forums, the regulators have shared that many
grievances filed against IRP/RP/Liquidator are frivolous (lacks
merit, may be based on misunderstandings or miscommunications,
filed with malafide intentions) and they adopt a very cautious
approach after thorough investigation. However, in cases where
the grievances are found to be true, the regulators have taken
stringent actions.
(c) As a deterrent, there need to be a mechanism for action against

the frivolous applications.
(d) There is no specific procedure that requires a stakeholder to formally

communicate on the grievance to the IP and that only in case
of unsatisfactory response they should approach the Regulator.
Such communication may be considered to be embedded in the
regulations to provide a non-adversarial approach vis-a-vis the
IPs.
6.2.12 Lender’s Liabilities in respect of Processes under the Code
(a)
The IBC is a legal framework for resolving insolvency and
bankruptcy cases in India. While the Code aims to provide a fair
and transparent process for resolving such cases, there have
also been instances of unethical conduct in the application of the
Code by various stakeholders such as IPs, IPEs, COC members,
creditors, etc.
(b) Most of the key decisions in IBC are required to be taken only
with the approval of CoC. While RP is entrusted to ensure
the integrity of the entire process, the Courts through various
judgements, have held the commercial wisdom of the CoC to
be supreme. Recently, in many cases, there has been litigation
around whether some of these decisions fall within the purview
of RP or CoC, such as:

(i) Decision to conduct a challenge process in resolution.

(ii) Distribution of Liquidation Value to individual members of CoC.
(c) The jurisprudence in some of these areas are still emerging which
will pave the way for future cases. Any principle-based law such
as IBC will have grey areas as it needs to deal with variety of
situations, and it cannot be dealt with a framework which is too
prescriptive. Needless to state that the best course available with
RP is to dispassionately evaluate each situation and seek legal
advice and based on that the RP needs to take a judgement with
proper documentation.
(d) In many cases of disciplinary cases decided by the IBBI, emphasis
was placed on carrying out the processes in the true spirit of the
code and maintenance of proper books and records to substantiate
the efficacious conduct of the process.
(e)
However, in one case, the disciplinary committee of IBBI
cancelled an IP’s professional registration, saying he/she had
rushed to liquidate the company without giving an opportunity for
resolving or restructuring the ailing business. The order passed
by the disciplinary committee of IBBI stated that “the decision of
liquidation was taken without following the true spirit of resolving
the corporate debtor as a going concern, which is the heart and
soul of the code”. However, as highlighted below, the power to
take decisions like liquidation, lies with COC whereas IRP/RP’s
role is to run the process as provided under the Code and under
guidance of COC.
(f) Under IBC, the Committee of Creditors (CoC) play a critical role
in shaping key decision-making processes. The IBC provides for
the formation of a CoC comprising financial creditors, who are
primarily responsible for taking key decisions during the insolvency
resolution process. The financial creditors have large stakes in
the process, are supposed to have relevant experience and use
their commercial wisdom. COC members have been authorized to
take decisions in the interest of the entire process in a time-bound
manner.
(g)
The CoC is responsible for approving or rejecting resolution
plans and also has the power to initiate liquidation proceedings, if
necessary. The CoC’s decision-making process is guided by the
principles of maximization of the value of assets of the corporate
debtor and balancing the interests of all stakeholders involved.
(h)
The NCLT, NCLAT and Supreme Court have time and again
stressed upon the supremacy of the commercial wisdom of the

Value maximization in Liquidation Process
Committee of Creditors. Over a period, role of COC has widened

and has become comprehensive. COC’s commercial wisdom
now, inter alia, encompasses the following areas:
• Replacement of IRP or RP by COC at any time without

providing any reason.
• All CIRP expenses approved by COC.
• All appointments cost approved by COC.
• PRAs eligibility criteria,commercial terms, negotiations, and

final approval or rejection of the resolution plan or approval of
liquidation;
(i) While the Code provides for a Code of Conduct for IPs, there is no
provision for conduct of COC and its members who supervise IPs.
This may be considered to be enabled at the earliest.
7. Value Maximization in Liquidation Process

7.1 Till March 2023, 2030 CDs ending up with orders for Liquidation had an
aggregate claim of Rs. 9.20 lakhs crore against the assets valued only
at Rs.0.64 lakh crore. While the claims of FCs comprised 90% of the total
aggregate of the claim amount i.e. 8.30 lakhs crore, the claims of OCs were
only 0.90 lakhs crore.
7.2 Further, more than 76% of the CIRPs ending in Liquidation (1548 out of 2022
for which data are available) were earlier with BIFR and/or defunct. It shows
that the economic value in most of these cases had almost completely eroded
even before they admitted into CIRP.
7.3 520 liquidation cases in which final reports have been submitted, had an
aggregate outstanding claim of Rs. 1.18 lakh crore, but the concerned assets
valued only at Rs. 0.05 lakh crore against which Rs. 0.045 lakh crore were
realised.
7.4 The following factors contributed to the under realisation, and these have been
discussed in detail in the paragraphs above:
(a) Inherent state of assets and market conditions.
(b) Legal delays and pendency of Avoidance applications.
(c)
Size of the assets which limit geographical re-distributions upon
dismantling.
(d) Inter creditor disputes.

7.5 In the above context, a Liquidator’s role is limited to conducting repeat auctions
at successive relaxations of 25% (second auction) and 10% (subsequent
auctions ) on the previous reserve price and to wait for the process to end.
Creditors are generally not inclined to accept distributions in species and there
is further value erosion due to the passage of time.
8. Conclusion
8.1 Despite many factors responsible for success or failure of any rescue effort as
noted above, it is felt that IPs in the capacity of IRP/RP/Liquidator, have been
singled out and often find themselves at the receiving end of the criticism.
Over time judicial pronouncements and regulatory orders against the IPs
in the capacity of IRP/RP/Liquidators, have also created perception about
professionals’ capabilities and ethical conduct. Such criticism is important and
should be welcome in the interest of well-rounded development of profession
and the insolvency regime. However, in the noise of such criticism, hard work
by many professionals, often remains unacknowledged and do not come to
light and thus depriving IPs of their well-deserved recognition and appreciation.
8.2 The above narrative, though reflection of critical feedback should be tested in
the light of facts or ground reality.
8.3 It is important to note that among several stakeholders, IPs constitute the
only segment which is subjected to strict regulatory oversight. Therefore, for
settling any debate on conduct of IPs, it is imperative to sift facts from fiction,
in a non-partisan manner. Such exercise should be backed by hard facts and
data to be credible.
8.4 The above report attempts to examine the underlying issues, facts, and data in
a comprehensive manner, before making certain recommendations to pave the
way forward. Such recommendations are in the context of resolution process,
adjudication process, coordination with COC and stakeholders and liquidation
process. In nutshell, IPs act in unison with many verticals in the ecosystem
and share the success (or otherwise) with such other verticals. The solutions
to many challenges as highlighted in the report lie in cohesive and coordinated
approach among such verticals and pillars of IBC ecosystem.


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Study Group Report on

Contribution by Insolvency Professionals

Indian Institute of Insolvency Professionals of ICAI (IIIPI)

Published in: September 2023

Copyright © Indian Institute of Insolvency Professionals of ICAI (IIIPI)

The purpose of this publication is to highlight positive work and contribution of

Date: September 22, 2023 Dr. Ashok Haldia,

Study Group Report on Contribution by Insolvency iii www.iiipicai.in

This ‘Contribution by Insolvency Professionals in Resolution under IBC’ has been

Subodh Kumar Agarwal, IP (Chairman of Study Group)

Date: September 22, 2023

Study Group Report on Contribution by Insolvency v www.iiipicai.in

2. Stakeholder Awareness and Financial Governance Frameworks.........2

3. Survey of Insolvency Professionals.......................................................4

4. Timeliness of Resolution Process..........................................................5

5. Timeliness of Liquidation Process........................................................13

6. Value Maximization in Resolution Process..........................................16

7. Value Maximization in Liquidation Process..........................................23

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1.5 IBC introduced insolvency regime in India based on “Creditors in Possession”

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1.7 The success of any Insolvency Resolution process or Liquidation process is

2. Stakeholder Awareness and Financial Governance Frameworks

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3. Survey of Insolvency Professionals

32% of IPs handled in aggregate claims

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4. Timeliness of Resolution Process

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2 From ICD 1287 352 NA 1630 415 NA 400 623 NA

4.2 Delays in admission of cases to CIRP

4.2.3 Instances of malicious commencement of proceedings have also been

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4.2.6 A well-defined mechanism needs to be instituted to discourage the

4.3 Lack of support / co-operation from existing management of CD:

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4.3.4 A stringent mechanism should be provided in the Code to make the

4.4 Delays in forming an Opinion, determining amounts, and filing Applications in

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4.4.6 Where applications have been filed under Sec 66 (Fraudulent

4.5 Legal Process Challenges

4.5.1 The delays in completion of CIRP are also a function of delays in

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Sl. Nature Applications Filed Applications Disposed

1 Preferential 134 15,056.69 40 651.13 34.15

• Frivolous and vexatious applications discussed in the earlier

• Multiplicity of litigations by stakeholders at various stages of CIRP

• Full member strength in AAs not yet achieved by the Government.

• Absence of dedicated AAs for IBC matters. The AAs including

• No fast-track process for immediate disposal of Resolution Plan

• There are no straight through processes under the Code. For

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4.5.7 Certain applications such as those seeking extension under Sec 12

4.6 Role of COC

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4.7 Interim Finance

4.7.3 A revision in the Code/ Regulations to require members of the CoC,

4.8 Inter-Creditor Issues

4.8.1 IRPs/RPs often face challenges especially in managing large CoCs

4.8.2 A solution which provides for timely resolution of inter-creditor issues is

4.9 Evolving Jurisprudence

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2. Stakeholder Awareness and Financial Governance Frameworks.........2

2. Stakeholder Awareness and Financial Governance Frameworks

4.2.3 Instances of malicious commencement of proceedings have also been

4.2.6 A well-defined mechanism needs to be instituted to discourage the

4.3.4 A stringent mechanism should be provided in the Code to make the

4.4.6 Where applications have been filed under Sec 66 (Fraudulent

4.5.1 The delays in completion of CIRP are also a function of delays in

• Frivolous and vexatious applications discussed in the earlier

• Multiplicity of litigations by stakeholders at various stages of CIRP

• Full member strength in AAs not yet achieved by the Government.

• Absence of dedicated AAs for IBC matters. The AAs including

• No fast-track process for immediate disposal of Resolution Plan

• There are no straight through processes under the Code. For

4.5.7 Certain applications such as those seeking extension under Sec 12

4.7.3 A revision in the Code/ Regulations to require members of the CoC,

4.8.1 IRPs/RPs often face challenges especially in managing large CoCs

4.8.2 A solution which provides for timely resolution of inter-creditor issues is

4.9.2 Further, in case of emerging judicial precedents, judgements of Apex

a) The SCC comprises of representatives of secured FCs, unsecured

b) The above involves significant co-ordination efforts to be made by

b) Before amendment vide Reg.44A (effective Sept.’2022) allowing

c) Post dissolution, drawing reference from international territories

a) Most CIRPs are triggered upon lapse of significant after initial

b) Further, the decision regarding the mode of sale also requires

c) To take care of genuine cases and in the interest of timeliness

6.2.1 Delay in initiation of CIRP / time-lag between identification of stress or

(b) Further, in cases while lenders have initiated proceedings under

(b) Typically, in addition to the Plan amount, the following additional

(a) In cases where group of assets belonging to a single business is

(a) There could be cases where a Corporate Debtor pre-dominantly

(b) The impact of such duplicity needs to be examined to arrive at an

(a) Many avoidance applications which are filed by RPs in situations

(a) The various factors cited in the segment(para 4) on Timeliness

(b) A mechanism should be provided under the Code to include such

(c) Section 96 in respect of interim moratorium, may be amended

(c) As a deterrent, there need to be a mechanism for action against

(d) There is no specific procedure that requires a stakeholder to formally

• Replacement of IRP or RP by COC at any time without

• PRAs eligibility criteria,commercial terms, negotiations, and